Nikita Arora's Blog

B.C home prices are expected to fall next year,according to a new report by CIBC.The report says that  B. C. home prices are overvalued by almost 17 per cent and due for a price correction.

“Granted, no part of Canada looks to be immune to further housing market weakness, with significant momentum having been more recently lost,” economist Warren Lovely said in the CIBC report. “But it’s in B. C. and Alberta where housing prices have overshot fair market value by the largest margin, with an ongoing correction expected to dull residential construction activity and blunt consumer enthusiasm.”

The information is contained in a larger report that states the end of government stimulus, the continued reluctance of U. S. consumers to spend and a softening of the Canadian housing market will see real GDP growth fall well below federal and provincial government forecasts for 2011.
Of B. C.’ s overvalued home prices, CIBC deputy chief economist Benjamin Tal believes B. C. prices could drop 10 per cent over the next year — possibly more in Metro Vancouver where prices are so much higher — before settling down. “The housing market in Canada is overshooting itself,” said Tal, in an interview. “It’s not a crash. It’s an adjustment. There are no preconditions for a crash.”
After the adjustment, he said, the B. C. market could be subdued for several years, rising with inflation, “probably two to three per cent a year.”

Another report by Central 1 Credit Union,however, expects the median prices to fall 5% in the next year ,as opposed to 10% expected by CIBC.It forecasts the prices to fall to $3,70,000 after increasing 5% in 2010 to $3,88,000 because of sales activity early in the year.It then expects the prices to rebound in 2012 to $3,80,000.According to Central 1 Economist Bryan Yu,”Weak sales and increasing inventory in the latter part of 2010 have put a downward pressure on prices.And,those declines will persist in early 2011.But,lower prices and attractive mortgage rates will be a powerful incentive in attracting an increased number of buyers in the market next year.”

Thus,whether the prices fall by 5% or 10%,there will be a fall for sure ! And,as the Prof. Gateman says,there are always winners and losers.So,yeah,it sounds like a good time coming to buy homes at an affordable prices for those who haven’t been able to buy homes at the recent [very] inflated rates ;but then,sellers beware ! The road is closed for price correction!